The Abbott government has created one of the investment banking upsets of the year with its surprise decision to leave out
UBS
from the line-up of lead managers for the $4 billion privatisation of Medibank Private.

UBS has long enjoyed a dominant position in the local investment banking market. According to Dealogic, it is ranked in top position in terms of the value of equity capital transactions done so far this year, ahead of Citi,
Macquarie Group
, Morgan Stanley and
Goldman Sachs
.

Although the investment bank declined to comment, its exclusion prompted some to suggest that it had perhaps been too aggressive in its pitch for the mandate, assuming that it would automatically be selected.

There was also huge surprise that
Deutsche Bank
had been chosen as one of the joint lead managers – along with Goldman Sachs and Macquarie Capital – in charge of selling the government’s stake in Medibank.

Still, it’s extremely likely that Canberra would have been reassured by Deutsche Bank’s experience in running New Zealand’s major privatisations, such as the $NZ1.7 billion float of Mighty River Power and the $NZ1.8 billion float of Meridian Energy.

These big New Zealand deals would have allowed Deutsche to run the argument that not only is it adept at managing public sector clients, it can also manage the political obstacles associated with selling off government-owned assets.

The investment bank declined to comment. But whatever the reason for Deutsche’s appointment it is undoubtedly extremely good news for
James McMurdo
, the former senior Goldman Sachs and UBS investment banker, who took over as head of Deutsche Bank’s Australian and New Zealand operations at the beginning of February.

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There’s also no doubt that the three lead managers Canberra has selected all have strong – and extremely complementary – distribution capabilities.

Macquarie Bank has a strong domestic franchise, while Deutsche Bank is extremely powerful in Europe, and Goldman Sachs is a leading player in the United States.

Finance Minister
Mathias Cormann
will no doubt be hoping that all three investment banks will leverage their extensive client networks to ensure strong demand from local and foreign investors for the $4 billion float.

Meanwhile, as representatives from Goldman Sachs, Macquarie and Deutsche flew down to Canberra on Tuesday in order to meet with Department of Finance officials, attention has shifted to the timing of the Medibank float.

Although Cormann has previously indicated that the government is hoping to have Medibank listed by the end of the 2014-15 financial year, this is an extremely protracted sales process by private sector standards.

Indeed, the three investment banks are almost certain to be quietly hoping that they can quickly get Medibank prepared for life as a listed entity, which would clear the way for a float later this year.